Section 25 A of the Income Tax Act,1961: Special provisions for arrears of rent & unrealized rent
Updated: Oct 7, 2022
The section states that:
(1) The amount of arrears of rent received from a tenant or the unrealised rent realised subsequently from a tenant, as the case may be, by an assessee shall be deemed to be the income from house property in respect of the financial year in which such rent is received or realised, and shall be included in the total income of the assessee under the head "Income from house property", whether the assessee is the owner of the property or not in that financial year.
(2) A sum equal to thirty per cent of the arrears of rent or the unrealised rent referred to in sub-section (1) shall be allowed as deduction.
The section provides that the amount of rent received in arrears or the amount of unrealised rent realised subsequent by an taxpayer shall be charged to income tax in the previous year in which such rent is received or realised, whether the taxpayer is the owner of the property or not in that previous year. 30% of the arrears of rent or the unrealised rent realised subsequently by the taxpayer, shall be allowed as deduction.
The taxpayer has received arrears of rent received from a tenant or the unrealised rent realised subsequently from a tenant. The amount so received shall be taxable under the head ‘Income from house property’ in the year of receipt after deducting standard deduction @ 30% of such amount. No other deduction shall be allowed from such income (unrealised rent and arrears rent) except standard deduction i.e. 30% of such receipt. (even legal expenditure or legal expenses shall not be allowed as deduction).The income is taxable on cash basis.
Such receipt shall be chargeable as income under the head house property (house property income) although the taxpayer is not the owner of such property in the year of receipt.